China to Loan South Sudan $8 Billion

China will provide South Sudan $8 billion in development loans over the next two years, a government spokesman said.

The loans will be used for road construction, agriculture, hydroelectricity, infrastructure and telecommunications, which would be built by Chinese companies, according to Barnaba Marial Benjamin, South Sudan’s government spokesman. He declined to reveal the cost of the borrowings.

China signed agreements promising to provide the funding during South Sudanese president Salva Kiir’s visit to Beijing on April 23 to April 26. “It was a very successful visit,” Benjamin said by phone today from the capital Juba. “I think this funding came at the right time.”

South Sudan acquired three quarters of the formerly united nation’s 490,000 barrels of oil a day output when it declared independence on July 9. The export pipelines and processing facilities remain in Sudan and the two countries have been unable to agree on fees for use of the infrastructure. South Sudan lost 98 percent of its revenue when it halted production in January after accusing Sudan of stealing $850 million worth of its oil. Sudan said it confiscated the crude to make up for unpaid fees.

Kiir discussed South Sudan’s plan to build export pipelines that bypass Sudan with Chinese officials, Benjamin said, adding that China didn’t agree to finance such a project.

“They will consider the fact that it is important to have an alternative pipeline,” he said.

Alternative Pipelines

South Sudan said in January that it was planning alternative links. It signed a memorandum with Ethiopia in February to build a pipeline via Djibouti, and said that it’s in talks with a Texas-based construction company to build another line to the Kenyan coastal town of Lamu.

South Sudan’s chief negotiator with Sudan said on April 23 that his country has taken a “strategic decision” to no longer export its oil through Sudan.

Oil revenue sharing is among issues outstanding since the south seceded after fighting a two-decade war with Khartoum. Talks since independence have failed to yield agreements on disputed border regions, and the two nation’s forces have clashed frequently along the frontier.

China dispatched an envoy to the Sudanese capital Khartoum to try and help ease tensions, who would also probably visit Juba in South Sudan in the coming week, Benjamin said.

Crude in both countries is pumped mainly by China National Petroleum Corp., Malaysia’s Petroliam Nasional Bhd. and India’s ONGC Videsh Ltd.

To contact the reporter on this story: Jared Ferrie in Juba at jferrie1@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net

http://www.businessweek.com/news/2012-04-28/china-to-loan-south-sudan-8-billion